September 12, 2000

Mr. Horst Köhler
Managing Director
International Monetary Fund
Washington, D.C. 20431, United States

Dear Mr. Köhler:

The attached memorandum of economic and financial policies (MEFP) reviews economic developments in Gabon since 1998 and the progress made in managing the central government finances since 1999. It also sets out the objectives of the economic program for 2000–01, as well as the economic policies and reforms that the government has already implemented and those envisaged for 2001. In support of these policies and reforms, the Government of Gabon requests an 18-month Stand-By Arrangement in an amount equivalent to SDR 92.58 million (40 percent of quota on an annual basis) from the International Monetary Fund.

The government aims at consolidating the central government finances through measures geared at optimizing fiscal revenues and reducing noninterest current expenditure. The policies also seek to improve the quality of spending, to enhance transparency in central government financial operations, and to strengthen governance in general. These policies, coupled with the revamped structural reform program, are expected to give a new impetus to economic activity in the non-oil sector in the face of rapidly falling oil production, contribute to job creation and help improve the standard of living of the poorest segments of the population.

Although the budgetary outlook for 2001 appears favorable, the government is committed to continue its fiscal consolidation and structural adjustment efforts to put the country on a path of sustained growth and enable it to meet its external financial obligations and improve its creditworthiness. It is clear, however, that given the very heavy debt burden, substantial financial support from the international community will be critical this year and in the medium term in support of Gabon’s adjustment effort.

The technical memorandum of understanding (TMU), which is also attached, spells out the understandings for monitoring program implementation and reporting requirements, as well as the quantitative performance criteria and benchmarks and the structural performance criteria and benchmarks for the program. The TMU details information that the government commits to communicate to the staff of the International Monetary Fund on a monthly basis, and specifies the scheduled purchases and related conditions.

The government considers the economic and financial policy measures described in the MEFP to be appropriate to begin resolving the difficulties facing the Gabonese economy. Throughout the duration of the program, the government will maintain close relations with Fund staff and consult with the Fund at its own initiative or at the request of the Managing Director of the Fund on the economic and financial policies of Gabon, including the formulation of additional measures that may be necessary to achieve the objectives set out in the program.

Sincerely yours,

Attachments:
I. Memorandum of Economic and Financial Policies
II. Technical Memorandum of Understanding

Attachment I

Memorandum of Economic and Financial Policies
of the Government of Gabon

I.  Recent Developments

1.  After three years of good economic performance in the context of programs supported by the International Monetary Fund and the international community, Gabon’s economic and financial position deteriorated sharply in 1998. This deterioration was brought about not only by a worsening of the terms of trade (especially the sharp fall in world oil prices in 1998), but also by an expansionary fiscal stance, deficiencies in central government financial management, and serious weaknesses in governance. These combined factors produced unprecedented budget slippages, with extrabudgetary expenditures reaching 20 percent of GDP in 1998. Also, the implementation of the structural reform program contemplated under the Extended Arrangement fell far behind schedule, except for the privatization of the energy and water company (SEEG) in 1997 and the preparatory work for the reform of the legal and regulatory frameworks.

2.  The economic situation remained extremely difficult in 1999, as oil output declined by 11.4 percent to 15.6 million tons. Activity in the non-oil sector contracted by 8.9 percent, following drastic cutbacks in public investment expenditure. As a result, total real GDP fell by 9.6 percent and real GDP per capita by 12 percent, which led to higher unemployment (especially among young people) and increasing poverty. Moreover, persisting armed conflicts in the subregion and a large influx of refugees (from the Republic of Congo) also contributed to the weakening of the country’s economic and financial position, and complicated the government’s efforts to restore balance in the central government finances.

3.  In these difficult circumstances, the government started in early 1999 to regain control over central government finances. The main goal has been to correct the deficiencies in government financial operations and to restore transparency and credibility to budgetary operations. For a start, the government launched an audit of central government finances in 1997 and 1998, which was conducted by an international consultancy firm. The government also conducted a separate audit of domestic public debt; strengthened control over central government expenditure; and reorganized the Ministry of Economy, Finance, Budget, and Privatization. Noninterest current expenditure declined in relation to GDP from 27.1 percent in 1998 to 16.4 percent in 1999, while the share of public investment outlays was brought down to 4.2 percent, from 13.7 percent in 1998. As a result of these efforts, major progress was made in 1999 in correcting the large fiscal imbalances recorded in 1998; a primary fiscal surplus equivalent to 8.1 percent of GDP was achieved, compared with a deficit of 6.3 percent of GDP in 1998.

4.  Nevertheless, despite these efforts and the rising world oil prices in the second half of the year, Gabon was unable to service fully its external debt obligations and continued to accumulate external arrears in 1999. At end-1999, these arrears amounted to CFAF 472 billion (16.7 percent of GDP), including penalty interest. As regards domestic public debt, as a result of the government’s audit, the total amount outstanding, which had initially been estimated at CFAF 746 billion (28.2 percent of GDP) at end-1998, was revised downward by CFAF 347 billion to CFAF 399 billion (15.1 percent of GDP). The domestic public debt at end-1999 was estimated at CFAF 363 billion (12.8 percent of GDP).

5.  Overall, economic performance remained lackluster during the first half of 2000. While oil sector prospects improved, economic growth in the non-oil sector continued to be weak. However, signs of recovery were evident in forestry and wood pro-cessing, where activity remained buoyant because of sustained external demand for timber and the entry into production of timber mills and wood processing plants. Also, customs data point to strong foreign trade during the first semester. These developments, combined with the increase in oil revenue and the resumption of public investment expected in the second half of the year, should help contain the contraction of real GDP to 2.9 percent in 2000.

6.  In the fiscal sector, government oil receipts reached CFAF 350 billion (10.3 percent of GDP) during the first half of 2000, including CFAF 111 billion in lagged payment on the 1999 income tax liabilities of the oil companies. Partly as a result of the measures that had been taken in late March 2000 to strengthen the tax and customs administrations (see para. 19 below), non-oil fiscal revenue reached CFAF 201 billion (5.9 percent of GDP) during the first semester, exceeding the target by 11 percent; and was some 21 percent above the outturn for the corresponding period in 1999. With the better-than-targeted fiscal revenue, the Treasury accelerated the reimbursement of the central bank’s statutory advances to the government. The government reduced its indebtedness to commercial banks, thereby enabling a contingent agreement providing for cancellation of part of this debt to come into effect in April 2000. It also pursued its policy of repaying domestic payment arrears, with a view to stimulating private sector activity.

7.  During the first half of 2000, current expenditure (excluding interest payments) amounted to CFAF 296.2 billion (8.7 percent of GDP) on a commitment basis. This amount includes CFAF 51.4 billion of expenditure commitments made to cover the year as a whole (crédits délégués), of which CFAF 25.7 billion will be effectively spent in the second half of the year. On a cash basis, total noninterest current expenditures totaled CFAF 205.2 billion, in line with the cash treasury plan for the first half of the year. With the delay in putting in place the 2000 budget and the implementation of new procedures governing public sector procurement (see para. 17 below), investment expenditure commitments began only in early April.

II.  Medium-Term Economic Outlook

8.  In addition to a heavy external debt burden (see below), Gabon is faced with the prospect of a gradual decline in oil output over the next five years, because (a) the current oil fields are aging; and (b) no major new oil fields have been discovered in recent years. Even if new discoveries were to be made in the coming years, the industry estimates that production could only begin after 2004–05. Output projections by the oil companies, as confirmed by the Ministry of Mining, Energy, Petroleum, and Water Resources, point to a decline from 15.6 million tons in 1999 to 13.5 million tons in 2000, 11.3 million tons in 2001, and under 7 million tons by 2005. Based on the projections of world oil prices of the International Monetary Fund’s World Economic Outlook of July 2000 (US$26.5 per barrel in 2000, US$23 in 2001, and an annual average of US$20.7 over 2002-05), at current output trends, oil fiscal receipts could reach exceptionally high levels in 2000–01. However, beginning in 2002, they would start to decline, falling to 6.7 percent of GDP in 2005 (compared with an annual average of 18.3 percent of GDP during 1997–2000). At the same time, in addition to the very high level of accumulated external debt service arrears (CFAF 604.5 billion, or 17.8 percent of GDP, at end-June 2000), Gabon’s external debt service obligations are projected to average CFAF 346 billion (about 38 percent of total fiscal revenue) per year over 2000–05.

9.  The government is aware of the need to pursue and intensify its adjustment and structural reform efforts, with a view to promoting growth in the non-oil sector while addressing the issue of its heavy external debt burden. The government is of the view that, even if it managed to cover all the external financing needs in 2000 and fiscal prospects for 2001 were favorable, large external financing gaps will likely reappear beginning in 2002. Such external financing gaps could even reappear as early as in 2001 if world oil prices were to drop significantly below the levels projected under the program, notwithstanding the additional fiscal adjustment effort envisaged in the draft budget outline for 2001. Thus, the government is committed to taking additional measures over the medium term, with a view to generating annually 1.2 percentage points of GDP of fiscal adjustment over 2002–05.

III.  The Government’s Program for 2000–01

10.  The major goal of the government’s program is to lay the foundation for sustainable growth, a prerequisite for achieving poverty reduction. To this end, the government’s action will focus on five major areas: (a) promoting transparency and good governance, with a view to improving fiscal management and increasing the effectiveness of government expenditure; (b) consolidating public finances through measures designed to optimize fiscal revenue and reduce government spending; (c) maintaining the solvency and profitability of the domestic banks; (d) accelerating the structural reform process, in order to reduce the high production costs, improve the competitiveness of the corporate sector, and make the national economy more attractive to investors; and (e) raising the standard of living of all Gabonese in a sustainable manner so that they can effectively participate in the development of the country.

11.  The economic program for 2000–01 is based on the following assumptions: (a) a real economic growth in the non-oil sector of about 2.5 percent on average per year, which, however, would remain insufficient to offset the impact of declining oil output and avoid a fall in overall output; (b) an average annual inflation rate of about 2 percent; and (c) an improvement in the external current account (by 1.5 percentage points of GDP) during the program period, to 3.4 percent of GDP in 2001. On this basis, and with the expected decline in the domestic savings of the oil companies and maintenance of household consumption at its 1999 level in relation to GDP, the ratio of private domestic savings to GDP could decrease by 12.8 percentage points of GDP to 21.1 percent of GDP in 2001. Taking into account the programmed consolidation of public finances, the ratio of domestic savings to GDP would increase by 0.7 percentage point of GDP over the 2000–01 period, rising to 46.1 percent of GDP in 2001. The establishment of an environment conducive to private sector development, in particular the acceleration of the privatization program and the adoption of a more transparent and predictable legal framework, should help to increase private non-oil investment by 1.4 percentage points of GDP during the program period, to 10 percent of GDP in 2001, partly offsetting the expected decrease in oil investment. On this basis, the ratio of investment to GDP could be maintained at about its level in 1999 (24.3 percent) over the program period.

A.  Transparency and Governance

12.  The government is aware that greater transparency in government financial management and good governance in general are prerequisites for the restoration of Gabon’s credibility. Consequently, it has published the results of the two audits of the central government’s financial operations in 1997 and 1998 and of the domestic public debt that were completed at the end of 1999. Measures to control and monitor fiscal revenues and expenditures have been implemented, in line with the recommendations of the technical assistance missions of 1995 and 1999 of the International Monetary Fund’s Fiscal Affairs Department. All special funds and accounts were integrated in the state budget with the adoption by parliament of the revised Budget Appropriations Act (Finance Law) for 2000 on July 27, 2000. Moreover, the government is committed to not creating any new accounts or special funds outside the budget. Finally, following the completion of the 1999 domestic public debt audit, legitimate claims on the government were regularized in the form of new commercial agreements, which have been integrated into the total domestic public debt.

13.  The institutional and human resource capacity of the Ministry of Economy, Finance, Budget, and Privatization has been strengthened. The government has also reactivated the interministerial committee to monitor the implementation of the adjustment and structural reform programs. This committee is responsible for coordinating these programs within the Gabonese administration to make sure that all government bodies support the reforms undertaken. The technical support unit of this interministerial committee has also been reactivated and its staff strengthened, in order to improve coordination among government bodies at the time of the design, as well as in the implementation and monitoring of economic and financial policies. The Inspection Office in the Ministry of Economy, Finance, Budget, and Privatization is being reorganized, and its responsibilities redefined with the help of the French Ministry of Economy, Finance, and Industry. The office is expected to be fully operational by March 2001.

14.  A new integrated information system on government finance, which is expected to be fully operational by January 2001 at the latest, is being put in place. The timetable for its implementation process is specified in Table 2 of Attachment I. The main goal of the system is to improve substantially the transparency of the central government’s financial operations and to have in place a cash treasury management system that is both stricter and more efficient, in line with the procedures recommended by the 1999 and 2000 technical assistance missions from the Fund’s Fiscal Affairs Department for expenditure control and monitoring and government financial management. Specifically, the new system will provide for (a) a better coordination among the different units involved in central government expenditure; (b) a better programming of both revenues and expenditures; (c) real time data transmission; (d) consistency in central government budget execution; (e) effective enforcement of consolidated cash treasury management; and (f) multiyear simulation exercises in fiscal management and public debt.

15.  In the meantime, practical steps and procedures have been introduced or reinforced in order to ensure rigorous control and better monitoring of government expenditures, as well as more effective cash treasury management, so that reliable and comprehensive information can be made available on a timely basis. To this end, weekly meetings to monitor the execution of the budget have taken place since July 2000, involving the Office of the Minister of Economy, Finance, Budget, and Privatization and all the relevant General Directorates in the ministry. Coordination among the main tax and customs collection offices, notably through the appointment of a special coordinator, has also been strengthened, with a view to developing an integrated approach to data gathering, processing, and communication. These actions have already made it possible to shorten considerably the period within which the data on budgetary execution are made available.

16.  The government has also decided to reactivate the joint commission (comprising the Ministry of Mining, Energy, Petroleum, and Water Resources and the Ministry of Economy, Finance, Budget, and Privatization) that is responsible for auditing the oil companies (with the assistance of international oil experts where appropriate). This initiative will help not only to improve the quality and reliability of oil sector data but also to better assess the tax liability of the oil companies. Moreover, in order to better ascertain developments in production and exploitation costs in the oil sector and oil revenue projections, a financial audit of the oil companies will be launched in 2001. Furthermore, a committee to audit procurement tenders will be operational by December 31, 2000, at the latest. The government will also implement the first steps of a framework program (programme cadre) aimed at enhancing transparency and efficiency in the public sector (PATESP), with the assistance of the World Bank and the support of a Japanese government grant. This program basically aims at strengthening the capacity of social ministries in the preparation of their sectoral strategies and budgets, enhancing control of their expenditures, and improving information in their respective areas of responsibility.

17.  The government has revived the oversight functions within all state institutions, and especially that of the Government Audit Office (Cour des Comptes). Parliament now exercises fully its prerogatives with respect to legislative control over the government’s actions. In particular, it is enforcing the requirement that the Financial Statement (Budget Execution Law) of fiscal year (t–1) be approved prior to discussing and approving the Budget Appropriations Act (Finance Law) for fiscal year (t+1). The procedures for public procurement tenders have also been considerably strengthened, with in particular the strict application of procurement rules for purchases of goods and services and any public investment project in excess of CFAF 20 million. Furthermore, the Budget Appropriations Act (Finance Law) for 2000 has introduced the requirement that a certificate of approval from the Chief Planning Commissioner (Commissaire général au plan) (in the Ministry of Planning, Development Programming, and Land Development) be obtained for all public investment projects; the purpose of this requirement is to verify that the related expenditure is matched by the corresponding budgetary allocation, as approved by parliament. In addition, the government will adopt and submit to parliament by December 31, 2000 at the latest, a draft Anticorruption Law that will update the existing legal, regulatory, and criminal provisions, integrate them into a single law, and provide for the creation of an agency independent from the Executive. The procedures governing access to the relevant courts will be redefined to facilitate access to justice. Finally, the government is committed to intensifying its efforts to improve the functioning of the judiciary, notably at the level of the commercial courts (Tribunaux de commerce), by putting in place the necessary structures and staff and strengthening the training of the required specialized attorneys-at-law.

B.  Fiscal Policy

18.  The government’s objective under the program for 200001 is to consolidate further the underlying fiscal position, notwithstanding the exceptionally high oil prices. To this end, the government will endeavor (a) to raise non-oil revenue by 1.5 percentage points of GDP over 2000–01 over and above the annual projections in the absence of measures; and (b) to contain noninterest current expenditures, as detailed below. Overall, the revenue-raising and expenditure-reducing measures, which have already been implemented and those contemplated under the program, combined with the exceptionally high oil prices, should help to raise the primary budget surplus from 8.1 percent of GDP in 1999 to 15.6 percent of GDP in 2000 and further to 21.6 percent of GDP in 2001. On the basis of these budgetary projections, the budget financing gap would be contained at CFAF 533 billion (15.7 percent of GDP) in 2000, and a budget surplus of CFAF 117 billion (4.0 percent of GDP) would emerge in 2001. If the projected oil prices of US$23 per barrel for 2001 hold and the financing surplus materializes, Gabon would not draw the balance of the Stand-By Arrangement in 2001–02, thus treating the arrangement as precautionary. The resulting additional resources will be deposited with the central bank; and its eventual use, including for reducing Gabon’s public indebtedness, will be discussed with the staff of the International Monetary Fund in the context of the quarterly reviews.

19.  On the revenue side, since March 2000, the government has taken a number of administrative measures to improve the performance of revenue collection by the tax and customs administrations. Specifically, a coordinating unit staffed with representatives from both the Treasury and the General Directorate of Direct and Indirect Taxation has been set up. One of its principal tasks is to monitor systematically the recovery of taxes owed by delinquent taxpayers, as well as that of taxes withheld at source by enterprises and not yet paid to the Treasury. This unit establishes a schedule for the settlement of the tax arrears owed by enterprises. To assist in this task, the unit has been empowered with the same legal authority as that of the Treasury to force taxpayers to honor their tax obligations in line with the legal and regulatory requirements. Moreover, a number of other actions have been taken to (a) strictly enforce the rule that government procurement tenders are inclusive of the value-added tax (VAT) and customs duties; (b) centralize all relevant information on all government procurement payments within the General Directorate for Direct and Indirect Taxation in the Ministry of Economy, Finance, Budget, and Privatization; (c) reinforce the control of import valuations at the customs administration; (d) improve the taxation of rental income; and (e) establish collection target rates for both the tax and the customs administrations. Altogether, these measures should help to maintain non-oil fiscal revenue for 2000 at 11.8 percent of GDP, that is, at about its level in 1999 adjusted for the exceptional recovery of tax in arrears following the audit of the domestic public debt.

20.  Moreover, the draft Budget Appropriations Act (Finance Law) for 2001 will include additional measures aimed at broadening the tax base by: (a) lowering the exemption VAT threshold for both commercial and industrial enterprises; and (b) introducing a real property tax in the context of a comprehensive land reform (including the establishment of an official real estate register) that the government has launched recently. These additional measures, combined with the full effects of those taken in 2000, should generate additional non-oil revenue equivalent to 0.7 percent of GDP in 2001. In addition, in early 2001 the government will initiate a review of the fiscal exemptions that have been granted so far in the major non-oil economic sectors. The government is of the view that it should be able to complete this review prior to the preparation of the draft Budget Appropriations Act (Finance Law) for 2002. It also states its commitment not to create any new free trade or economic zones, other than that of the island of Mandji.

21.  On the expenditure side, the government’s priority is to reinforce further its control over noninterest current spending, in order to free up sufficient funds to meet the growing needs of the least-privileged segments of the population in health and education, ensure better maintenance of basic infrastructure, and meet Gabon’s external financial obligations. Consistent with this goal, in May 2000 the government (a) strengthened the capacity of the staff in the Ministry of Economy, Finance, Budget, and Privatization responsible for the timely monitoring of central government expenditures, notably in the General Directorate of the Treasury; and (b) put in place procedures to ensure better coordination among the relevant directorates. These actions have been supplemented by other measures aimed at reducing central government spending, which were introduced in the revised Budget Appropriations Act (Finance Law) for 2000 adopted by parliament on July 27, 2000. Moreover, given the pace of commitments of expenditures on goods and services through end-June 2000, the government has decided to limit noninterest current expenditures, on a commitment basis, to CFAF 189.0 billion (5.6 percent of GDP) during the second half of 2000. To this end, reductions in noninterest current expenditure of CFAF 47.5 billion (1.4 percent of GDP) were adopted with the revised Budget Appropriations Act (Finance Law) for 2000. These reductions are concentrated in transfers and subsidies (CFAF 33.9 billion, or 1 percent of GDP) and in goods and services (CFAF 10.2 billion, or 0.3 percent of GDP). In addition, in August 2000, the Finance Minister decided to freeze temporarily new commitments on account of current outlays for goods and services and transfers and subsidies through September, in order to ensure that the noninterest current expenditure limit for the second half of 2000 is being observed. The government is prepared to freeze new commitments in October if necessary to achieve the end-2000 target of CFAF 459 billion (13.5 percent of GDP).

22.  The bulk of the reductions in spending on transfers and subsidies introduced with the revised Budget Appropriations Act (Finance Law) for 2000 is on sovereign (presidential) expenditures, which have been reduced by CFAF 25 billion (0.7 percent of GDP), that is, to half the level projected for 2000 as a whole based on their pace in early 2000. To ensure the reduction in spending on goods and services, the government will (a) implement strictly the procedures for procurement tenders, as regards government purchases of office furniture and supplies and cleaning and maintenance of office buildings; and (b) as regards travel and transportation expenses, reduce the number and size of missions sent abroad and the number of chartered flights, eliminate the transportation allowance for government officials taking leave, and grant a lump-sum allowance for foreign shipment. The government has also taken a number of other measures, the full effects of which will be felt in 2001. These include notably an audit of government scholarships for Gabonese students, which was completed in June 2000. Its conclusions will allow the formulation of measures to provide for a more effective use of the amounts available for scholarships, with a view to achieving possible savings. Moreover, additional savings are expected from (a) reductions in water and electricity consumption, through the installation by December 2000 of control steps at delivery points and meters in government buildings; and (b) lower use of telephone services, through the installation of devices that restrict access to international communication networks, the introduction of an internal communications network among administrative offices, and rigorous monitoring of subscriptions and standing charges.

23.  In the area of wage policy, the government has started to implement some of the measures that have already been identified in the context of the ongoing comprehensive administrative/civil service reform (see para. 32 below), including the rigorous application of the retirement age and strict observance of recruitment procedures. In this respect, the provision of Article 23 of the general statute governing the civil service, which specifies the conditions under which the President of the Republic can promote a civil servant, will be strictly adhered to. Also, the government has started to reduce the number of advisers at the presidency and all the ministries. However, the savings from these measures are expected to be largely offset by the effects of the automatic increase in government wages under the existing legal framework, as well as of the new recruitment limited to health, education, and security sectors. Under the circumstances, and notwithstanding growing social pressures in a context of substantially improved fiscal revenue, the government will not grant a general salary increase, and it will continue to limit new recruitments to health, education, and security during the period of the Stand-By Arrangement.

24.  In addition to the measures specified in the preceding paragraph, the draft Budget Appropriations Act (Finance Law) for 2001 will include other actions for (a) the downsizing of the civil service through voluntary retirements; (b) the restructuring of the pay-scale; and (c) the revision of the promotion rules, in the context of the ongoing administrative reform. The housing allowances also will be reduced and harmonized. The goal is to maintain the government nominal wage bill in 2001 (CFAF 218 billion—48 percent of noninterest current expenditures) at about its level in 2000 (CFAF 216.1 billion). Sovereign expenditures will be kept at the reduced 2000 level. Finally, the government expects a marked reduction in subsidies to the public enterprises, following the acceleration of the privatization program in line with the schedule detailed in Table 2 of Attachment I and in Table 4 of Attachment II. As regards goods and services, purchases of official vehicles and hotel expense allowances will be reduced, and contracting of consultant services by the government will be substantially curtailed.

25.  The government is redefining its investment policy to focus on a limited number of priority sectors (basic education, primary health care, and basic infrastructure, including in road transportation) based on a rigorous, project-by-project examination. Given the external financing constraints, public investment will be limited to CFAF 102.1 billion (3.0 percent of GDP) in 2000 and to CFAF 125.1 billion (4.1 percent of GDP) in 2001. In preparing the draft budget for 2001, the government will continue to focus on increasing both the quality and the effectiveness of its public investment program. The latter will be examined every year, with the assistance of the World Bank, on the basis of the relevant objective economic criteria, with a view to eliminating those projects that do not comply with such criteria.

C.  Monetary Policy and Banking Supervision

26.  Monetary policy and banking supervision in Gabon are carried out at the regional level by the Bank of Central African States (BEAC) and the CFA franc zone, respectively. The BEAC’s monetary policy aims at consolidating the net external assets position of the BEAC while maintaining low inflation consistent with the fixed exchange rate peg to the euro. The monetary program for 2000 envisages that Gabon will contribute to the increase in the net foreign assets of the BEAC up to an amount of CFAF 108.6 billion while reducing the net claims of the banking system on the government by CFAF 91.6 billion (20.5 percent of the stock of broad money at the beginning of the year). In 2000, the increase in credit to the economy will be limited to about 1 percent. The stock of broad money is projected to increase by 4.6 percent in 2000. In line with the Central African Economic and Monetary Community (CEMAC) guidelines, and taking into account the exceptionally large budget surplus projected for 2001, the government will repay fully its central bank statutory advances by 2001.

27.  Based on 1998 and 1999 data, the government considers that, globally, the financial situation of the domestic banks in Gabon remained broadly satisfactory in terms of solvency and profitability. The prudential ratios of the Central African Banking Commission (COBAC) were observed by four major banks out of the eight banks operating in Gabon at end-1999. Although a fifth failed to observe the liquidity ratio, it remained solvent and profitable. Two other banks of marginal size did not observe any of the prudential ratios, and the remaining bank, a subsidiary of a foreign bank, is being liquidated (following a decision by the major shareholders of its parent bank abroad). The government acknowledges that provisions for doubtful and nonperforming loans by all the banks in 1998 and 1999 (37.2 percent and 36.0 percent, respectively) were lower than in 1996 and 1997 (87.8 percent and 66.1 percent, respectively). The government is of the view, nevertheless, that the 1998 and 1999 provisions remained adequate, given that part of the unpaid claims on the government that is included in the amount of the doubtful and nonperforming loans is not legally subject to provisioning by the banks.

28.  Even though the financial position of the banking system as a whole improved in the first three months of 2000, the monetary authorities of the CEMAC, as well as the Gabonese government, are determined to continue to monitor closely the situation and enforce strict observance of the COBAC’s prudential ratios. Thus, in agreement with the COBAC, the government will regularly examine the commercial banks’ balance sheets and other accounting documents that are needed to ascertain their financial soundness. Finally, also in agreement with the COBAC, the government will ask the International Monetary Fund and the World Bank to carry out a joint assessment of the financial institutions in Gabon in early 2001, under the Financial Sector Assessment Program (FSAP).

D.  Structural Reforms

29.  The priority given to regaining control over central government finances prevented the government from giving due attention to structural reforms and catching up in 1999 on the delays that had occurred in the implementation of its structural reform program. Nevertheless, in late 1999 and early 2000, the government took a few initiatives that gave a new momentum to the reform program. Thus, the concession of the management of the railroad company (Office du Chemin de Fer Transgabonais (OCTRA)) to the consortium selected after a public tender entered into force in December 1999. In addition, the new legal framework for the liberalization of the post and telecommunications sector and the privatization of the Post and Telecommunications Office (OPT) was put in place through the issuance of three executive orders in February 2000. These orders, which could not be ratified by parliament by the end of the most recent session, will be submitted again to parliament for ratification by December 2000 at the latest, in line with the constitutional requirement. The interconnection agreement between the OPT and the two other local cellular phone operators was signed in July 2000. The privatization of the cement company (Ciments du Gabon) became effective in July 2000 as well. Finally, the public offering for the selection of a provisional bidder (adjudicataire provisoire) for the privatization of the Agricultural Development Company (AGROGABON) was launched in May 2000.

30.  The government’s structural policy priorities during the program period will be (a) to continue divesting the state from productive activities and services, to reduce the budgetary subsidies for current operations and/or the restructuring of the public enterprises, and to make the economy more efficient; and (b) to improve the legal and regulatory framework, in order to promote private investment. Consistent with these priorities, the government’s divestiture program focuses its efforts on the privatization of five key public enterprises in the post and telecommunications, agribusiness, wood processing, and transport sectors, along the lines of the timetable detailed in Table 4 of Attachment II. The enterprises are, the OPT, AGROGABON, HEVEGAB, CFG, and the Office of the Ports (OPRAG). In addition, a restructuring plan for Air Gabon was adopted in June 2000. A privatization program based on this restructuring plan will be finalized by December 31, 2000 at the latest, so that the tenders for the concession of management to the private sector can be launched by January 2002. Steps will also be taken to prepare the privatization or the liquidation of other public enterprises along the lines of the agenda detailed in Table 4 of Attachment II.

31.  The government also intends to accelerate the adoption of implementing decrees relating to the investment charter promulgated in 1998. In this respect, a single window for the formalities relating to the establishment of companies will be in place by September 30, 2000. To this end, an Office for the Promotion of Private Investments (Agence pour la promotion des investissements privés (APIP)) was established, and its Managing Director appointed in July 2000. The system of licenses issued by the Ministry of Commerce for the establishment of new companies (in transportation, trade, etc.) will be simplified. The revised Labor Code, with all the provisions that had hampered job creation removed, was submitted again to parliament in July 2000. The Mining Code, which was adopted by parliament in July 2000, will be promulgated in October 2000. The Forestry Code will be submitted to parliament by December 2000. The government will draft a new Commercial Code in line with the investment charter and the provisions (Actes uniformes) of the Organization for the Harmonization of Business Law in Africa (OHADA) (see Table 4 of Attachment II). Finally, the government remains committed to reduce the maximum common tariff applicable to imports, in line with the CEMAC schedule.

32.  As regards the administrative/civil service reform, the government (a) launched in June 2000 a comprehensive physical survey of the civil service (following the preliminary census of civil servants completed in 1999), which it is determined to complete by October 31, 2000; (b) will pursue its policy of freezing promotions; and (c) will continue to combat fraudulent promotions and other practices (such as forgery of documents and false diplomas). The specific priority actions include preparatory steps for the harmonization of the civil service roster and the payroll by March 2001 (Table 4 of Attachment II), in order to have in place a common database for the Ministry of Economy, Finance, Budget, and Privatization and the Ministry of Civil Service, Administrative Reform, and Modernization of the State (Table 2 of Attachment I). This single roster, which will also serve as the basis for human resource management in the civil service, will be operational by December 31, 2001 at the latest. Finally, the government will ensure that, following the revision of the general statute for the civil service and other special statutes, the related laws and regulations are submitted to parliament before end-June 2001.

E.  Poverty Reduction

33.  In terms of GDP per capita (approximately US$4,000), Gabon is one of the richest countries in sub-Saharan Africa. Nevertheless, according to the 1997 poverty study by the World Bank, Gabon’s social indicators in 1996 barely differed from the average for the other countries in Africa; the proportion of the population living in extreme poverty remained high; and over 60 percent of the population lived in relative poverty. The government believes that there has been a further deterioration since then. Faced with this situation, the government, in consultation with the civil society, has begun work on a comprehensive poverty reduction strategy that it intends to complete by December 2001. The strategy will incorporate specific sectoral programs in health and primary education, as well as an urban development program that is to be adopted by December 2000. In launching the strategy, the government will focus on the following three areas: (a) opportunities for job creation in the private sector and improvement of the living conditions of the urban poor (about three-fourths of the population lives in urban areas); (b) redirection of public spending toward basic health and education, and enhancement of the effectiveness of such expenditures; and (c) rehabilitation of social welfare institutions. In this context, the government will, with the assistance of the World Bank and the African Development Bank, implement a pilot community infrastructure project (Travaux d’Infrastructures Communautaires et de Renforcement). The purpose of this project is to improve the living conditions in the poorest urban areas by repairing roads and drainage, and sanitation facilities. The project is expected to help create some 1,200 jobs for unskilled labor by involving some 50 small enterprises.

34.  Although public expenditures on health and primary and secondary education in Gabon are quite high, the results have been disappointing. Therefore, the efforts of the government will focus on improving the effectiveness of these expenditures. To optimize the effectiveness of both investment and operating expenditures and to redirect resources to the least-privileged areas, the government will update the necessary information for the preparation of sectoral and central government budgets by March 2001. Such information will include in particular a health database, a school database (based on the existing provisional draft database), and a review of the unit costs in primary and secondary education. In addition, the government will finalize by June 2001 the demographic and health survey, which is conducted with the assistance of the United Nations Population Fund (UNFPA) and the United Nations Children Fund (UNICEF) and the support of a Japanese grant managed by the World Bank. The information gathered in the context of this survey will also be used to update the data on poverty used in the World Bank’s report on poverty of 1997. In the health sector, to carry out the measures included in the basic law on reform of the health sector, the implementing decrees relating to the organization and operation of the National Pharmaceutical Office and of public hospitals will be promulgated by end-June 2001. The government has also launched an awareness campaign about AIDS and sexually transmitted diseases, and it will adopt a national strategy to fight such diseases by December 31, 2000. Finally, the law on the protection of women, mothers, and children, which was adopted by parliament on June 30, 2000, constitutes a major step in the government’s efforts to reduce poverty.

35.  In the area of social welfare, with the assistance of the International Labor Office the government has begun an in-depth study aimed at restoring the financial soundness of the National Social Security Fund (CNSS) and at reorganizing its management. An actuarial study of the hospitals managed by the CNSS will be completed by September 2000, so that a program to privatize the management of the hospital branch of the CNSS can be adopted by December 31, 2001.

F.  External Financing Needs

36.  The implementation of the economic program described above should make it possible to limit the financing gap to CFAF 533 billion in 2000 (15.7 percent of GDP), after taking into account the already identified external financing sources. The outstanding external debt-service arrears (estimated to total CFAF 604.5 billion at end-June 2000) will be eliminated by March 31, 2001. The government will ask members of the Paris Club to consider its request for a debt rescheduling and seek a similar rescheduling of its debts owed to other bilateral official creditors. Such a rescheduling, combined with the debt already cancelled and the purchases contemplated under the Stand-By Arrangement with the Fund, would leave a residual financing gap of CFAF 30 billion in 2000. This residual gap is to be covered by a deferral through end-March 2001 of the full settlement of Gabon’s outstanding arrears to the African Development Bank (AfDB), which totaled CFAF 54 billion at end-July 2000. The AfDB has agreed to such a plan. Moreover, the government intends to regularize its external arrears to other bilateral and multilateral creditors. Finally, it is committed not to accumulate any new external payments arrears during the program period.

G.  Program Monitoring: Statistical Information, Prior Actions, Quarterly Reviews, Quantitative and Structural Performance Criteria and Benchmarks, and Adjusters

37.  Since early 1999, the government has taken a number of steps to improve the quality of statistics and to strengthen its statistical facilities, based on the recommendations of the technical assistance missions of the International Monetary Fund’s Statistics Department of 1998 and 1999. In particular, it has set up an Interinstitutional Committee on Statistics responsible for providing the government with reliable and consistent statistics rapidly. Thus, since the end of December 1999, it has managed to communicate to the International Monetary Fund data and other basic economic and financial information that are reasonably current on a regular basis. Furthermore, the staff in charge of preparing balance of payments statistics, especially those on the oil sector, has been strengthened. The government also intends to improve the quality and effective dissemination of data and other relevant information on poverty (see para. 34 above).

38.  The government estimates that Gabon will be in a position to achieve improvements to its statistical system in accordance with the General Data Dissemination System (GDDS) as planned by December 31, 2001. To this end, provisions have already been made to (a) revise the statistics and tax declaration forms in order to secure more detailed balance of payments data; and (b) revise the current Statistics Law, with a view to strengtheningthe institutions responsible for gathering and compiling economic and social statistics. The government undertakes to submit the revised Statistics Law to parliament by September 30, 2001.

39.  All the prior actions have already been taken (Table 2 of Attachment I). In particular, the expenditure targets of the revised Budget Appropriations Act (Finance Law) for 2000 (adopted by parliament on July 27, 2000) and the fiscal and macroeconomic performance in the first half of 2000 are in line with the economic program described above. Moreover, in order to facilitate the monitoring of program implementation: (a) quarterly reviews have been scheduled; (b) quantitative performance criteria for end-September and end-December 2000 and quantitative benchmarks for end-March, end-June, and end-December 2001 have been established; and (c) structural performance criteria and benchmarks have also been established. The quantitative performance criteria and benchmarks are listed in Table 1 of Attachment I; the structural performance criteria in Table 2 of Attachment I; and the structural benchmarks in Table 4 of Attachment II. Furthermore, the program includes adjusters as specified in the technical memorandum of understanding.

Attachment II

Republic of Gabon

Technical Memorandum of Understanding

1.  This memorandum spells out the understandings for the monitoring of program implementation, the reporting requirements, and the purchase schedule and terms under the Stand-By Arrangement. In this context, it defines (a) the quantitative and structural performance criteria and benchmarks; (b) the adjusters for the quantitative performance criteria and benchmarks; and (c) the key assumptions used in the formulation of the program for 2000–01 presented in the memorandum of economic and financial policies (MEFP) of the Government of Gabon attached to the letter from the Minister of Economy, Finance, Budget, and Privatization to the Managing Director of the International Monetary Fund dated September 12, 2000.

A.  Monitoring of Program Implementation

2.  Monitoring of the implementation of the program will be made on the basis of (a) six quarterly reviews; and (b) an assessment of the observance of the quantitative and structural performance criteria and benchmarks at specified dates.

B.  Quantitative Performance Criteria and Benchmarks and Adjusters

3.  The quantitative performance criteria and benchmarks are specified in Table 1 of Attachment I. The performance criteria are

(a) A ceiling on the net claims of the banking system on the central government.

(b) A ceiling on the contracting or guaranteeing of new nonconcessional external debt with original maturity of 1 year to 12 years by the government, as of September 1, 2000.

(c) A ceiling on outstanding stock of new nonconcessional external debt with original maturity of less than 1 year owed or guaranteed by the government, as of September 1, 2000.

(d) A limit on the net accumulation of external arrears through end-September 2000, and clearance for end-December 2000 except for CFAF 30 billion to be deferred to end-March 2001.

(e) A floor on the net reduction of domestic public payments arrears, as of September 1, 2000.

(f) A floor on the primary fiscal balance (on a commitment basis).

4.  The program includes adjusters for the quantitative performance criteria and benchmarks as specified in paras. 16 and 17 below and in footnotes 3 and 4, Table 1 of Attachment I.

5.  The quantitative benchmarks are

(a) A floor on non-oil government revenue.

(b) A ceiling on the government wage bill, as of September 1, 2000.

(c) A ceiling on other noninterest current expenditure, as of September 1, 2000.

6.  The outstanding amount of the net claims of the banking system on the central government is measured in accordance with the accounting practice at the central bank, the BEAC, along the lines of the International Monetary Fund format—as specified in Table 1 of Attachment II. As of December 31, 1999, this outstanding amount was CFAF 304.5 billion, and its breakdown was as follows:

7.  The performance criteria on new external debt are cumulative ceilings on new nonconcessional debt contracted or guaranteed by the government. External debt with maturities of 1 to 12 years is debt with an original maturity of more than 1 year and of up to 12 years (twelfth year included), as specified in the initial contractual agreement (see footnote 5, Table 1 of Attachment I). Cumulative ceilings are also set on the outstanding stock of new nonconcessional external debt with an original maturity of up to 1 year (1 year included), owed or guaranteed by the government (see footnote 6, Table 1 of Attachment I). The concessional element of the loan will be calculated on the basis of the reference interest rates for the specific currency of denomination used, as established by the OECD. A debt is deemed to be on concessional terms if, at the time of the initial disbursement date, the ratio between the present value of the loan calculated on the basis of the reference interest rate, on the one hand, and the face (nominal) value of the loan, on the other hand, is less than 65 percent (i.e., a concessional element of at least 35 percent). As an example, the reference interest rates for the period August 15, 2000–September 14, 2000, were as follows:

8.  The accumulated amount of external arrears is calculated as the difference between (a) the gross amount of all the maturities falling due on account of contractual external debt service obligations (consisting of interest, principal, and penalty interest, where applicable); and (b) the amount of actual payments made during the period under consideration. The outstanding amount of external debt arrears are valued at the end of the period under consideration, with the foreign currency denominated debts converted into CFA francs on the basis of the exchange rates published by the International Monetary Fund. The external debt service schedule for 2000 was computed by the Directorate of Public Debt and Accounting (DGCP) of the Ministry of Economy, Finance, Budget, and Privatization, on the basis of the interest rates and exchange rates for the major currencies of denominations as specified in the attached Table 2 of Attachment II. The program includes an accumulation of external payments arrears on account of the maturities on the external debt service falling due between July 1 and September 30, 2000, excluding maturities due to the multilaterals and nonreschedulable maturities due to the Paris Club creditors. According to the DGCP data, the outstanding amount of external debt service arrears was CFAF 457.3 billion at end-December 1999 and CFAF 604.5 billion at end-June 2000, excluding penalty interest. Thus, external debt service payments are projected to reach CFAF 644.1 billion at end-September 2000 (and CFAF 670 billion, including penalty interest). This amount is scheduled to be settled by end-December 2000, including CFAF 161 billion through cash payment in line with the cash treasury plan for July–December 2000, except for an amount of CFAF 30 billion due to the African Development Bank, which is to be fully paid by March 31, 2001.

9.  The net change in the stock of domestic public arrears of the central government is the difference during the period under consideration between the contractual amount due and the actual payments. For the purpose of computing the net change, domestic public arrears consist of arrears on commercial agreements, bank debt under moratorium (dette bancaire moratoriée) as validated by the Ministry of Economy, Finance, Budget, and Privatization, and the treasury float.

10.  The fiscal revenue for 1999 is on a cash basis; and includes compensated revenue and expenditure operations, including the reimbursement of advances from oil companies. The fiscal revenues are specified in Tables 3 and 5 of Attachment II on central government financial operations (Tableau des opérations financières de l’Etat), including the gross credits and gross debits under the special accounts and funds. Total fiscal revenue in 1999 amounted to CFAF 813.6 billion, and is targeted at CFAF 1,098.5 for 2000 and CFAF 1,235.1 for 2001, based on the assumptions specified in paras. 20 and 21 below.

11.  Total fiscal expenditure is defined on an adjusted commitment basis, i.e., as all commitments adjusted to take into account advances (avances), expenditure committed for the year as a whole (crédits délégués), and anticipated expenditures (anticipations). Total fiscal expenditure will be limited to CFAF 763.6 billion (22.5 percent of GDP) in 2000 and to CFAF 745.5 billion (24.6 percent of GDP) in 2001. Total expenditure, excluding interest payments, will be limited to CFAF 567.7 billion (16.7 percent of GDP) in 2000 and to CFAF 580.1 billion (19.2 percent of GDP) in 2001. These amounts include expenditures under the special accounts and funds that were integrated in the budget with the adoption of the revised Budget Appropriations Act for 2000 on July 27, 2000.

12.  Monitoring of fiscal revenue and expenditure and their respective components will be made on the basis of Tables 3 and 5 of Attachment II.

13.  The primary fiscal surplus is on a commitment basis, and is defined as the difference between (a) total revenue and (b) total noninterest current expenditure plus public investment (including foreign-financed investment). The primary fiscal surplus is programmed to increase from CFAF 230.0 billion (8.1 percent of GDP) in 1999 to CFAF 530.8 billion (15.6 percent of GDP) in 2000 and to CFAF 655.0 billion (21.6 percent of GDP) in 2001.

14.  The government wage bill is defined on a commitment basis for all personnel (whether on a permanent or a temporary basis) of the civil service and the security and defense forces. The government wage bill in 1999 was CFAF 214.0 billion and should not exceed CFAF 216.1 billion and CFAF 217.9 billion in 2000 and 2001, respectively. It consists of all remunerations, including social contributions, housing allowances and other statutory allowances.

15.  The financial operations specified in Table 3 of Attachment II on central government financial operations (tableau des opérations financières de l’Etat) relating to the treasury correspondents (correspondants du Trésor) and other treasury operations must correspond to the overall balance of all these accounts taken together from one period to the other. The government will supply the overall balance of these accounts on a quarterly basis. The change in the overall balance of all these accounts between 1999 and 2000 does not affect government financial operations; a zero change has been programmed.

16.  A specific contingency mechanism for oil revenue is established for 2000–01, given the importance of oil for the Gabonese economy and the uncertainties regarding oil prices and output. As specified in footnote 4, Table 1 of Attachment I, if oil revenue is above the baseline projections in a given quarter, the surplus will be deposited at the central bank and its eventual use will be discussed with the staff of the International Monetary Fund in the context of the next quarterly review. The surplus could be used to reduce the public debt (including early settlement of external arrears where applicable). If oil revenue is lower than programmed, due to actual oil prices and/or output being lower than projected in the baseline scenario, 50 percent of the shortfall with a maximum of CFAF 30 billion (1 percent of GDP) could be offset by additional net borrowing from the banking system, with the remainder to be compensated by additional fiscal tightening (higher non-oil revenue and/or lower noninterest current expenditure). If the oil revenue shortfall exceeds 2 percent of GDP, the quarterly fiscal targets will be reassessed in consultation with Fund staff.

17.  The program also includes asymmetric adjusters for the quantitative performance criteria and benchmarks for greater/lower-than-programmed debt relief, nonproject external financing disbursements and net reduction of external arrears, as specified in footnote 3, Table 1 of Attachment I. The program assumes (a) that the Paris Club creditors would grant debt relief along the lines of the December 1995 agreement for a total amount of CFAF 462 billion and debt relief on similar terms would be obtained from other official bilateral creditors; (b) no nonproject external financing disbursement; and (c) disbursements on project-related external financing for a total of CFAF 20 billion both in 2000 and in 2001.

C.  Structural Performance Criteria

18.  The structural performance criteria are specified in Table 2 of Attachment I.

D.  Structural Benchmarks

19.  The structural benchmarks are specified in Table 4 of Attachment II.

E.  Key Assumptions of the 2000–01 Program

20.  The main assumptions of the program are the following:

21.  In computing the value of oil exports, oil output is reduced by 616,000 tons a year, the amount of domestically produced oil consumed by the domestic oil refinery company (SOGARA). As regards non-oil export tax and duties, the program assumes total timber and manganese exports of CFAF 298.8 billion and CFAF 81.5 billion, respectively, in 2000; and of CFAF 324.0 billion and CFAF 82.3 billion, respectively, in 2001.

F.  Reporting Requirements

22.  To facilitate monitoring of program implementation, the authorities will prepare monthly reports within four weeks following the end of the preceding month, which it will send promptly to the International Monetary Fund. In addition, the Technical Support Unit of the Interministerial Committee for the Implementation of the Structural Adjustment Programs will communicate each month to the Fund’s African Department by fax and/or letter and by e-mail the data and information required to monitor the implementation of the program. Such data and information will include (but are not limited to):

(a) The monetary survey, the central bank balance sheet, and consolidated balance sheet of the commercial banks, respectively.

(b) The net financial position of the government at the BEAC (PNG).

(c) The table on central government financial operations (tableau des opérations financières de l’Etat) on a commitment basis—Table 3 of Attachment II, as well as on a cash basis (treasury plan) according to the format specified in Table 5 of Attachment II.

(d) The detailed breakdown of the tax and nontax revenues.

(e) The detailed breakdown of the central government expenditures, on an adjusted commitment basis as defined in para. 11 above along the format agreed with the Fiscal Affairs Department’s technical mission of May 2000 (including advances (avances) and anticipated expenditures (anticipations)), as well as on a cash basis.

(f) The detailed domestic and external debt service obligations, as well as the stock of external arrears, on a contractual and actual payments basis, respectively, with a breakdown into interest and principal and by creditor.

(g) The amount of new external debt contracted or guaranteed by the government, with the detailed information on the original terms and conditions (contracted amounts, interest rate, and currency of denomination).

(h) The actual disbursements on nonproject-related external financial assistance, including on newly contracted loans, and the amounts of debt relief granted to Gabon by foreign creditors.

(i) Indicators and other data on recent economic developments, such as the CPI, merchandise imports and exports (in value and volume terms), oil and non-oil exports, oil output and export volume and prices, timber and wood processing production and exports (volume and prices), and production indicators for light processing and manufacturing industries, services, and mining, as well as the monthly reports on economic activity prepared by the General Directorate of the Economy and the Interinstitutional Committee on Statistics.

(j) A status report on the implementation of the structural reform specified in Table 2 of Attachment I and in Table 4 of Attachment II.

23.  The Technical Support Unit of the Interministerial Committee for the Implementation of the Structural Adjustment Programs will supply to the African Department of the International Monetary Fund any other information that it may view as helpful or as may be required by the staff of the International Monetary Fund for the effective monitoring of the implementation of the program.

G.  Purchase Schedule and Terms

24.  The purchases under the Stand-By Arrangement will be made according to the following schedule and conditions.

• The first purchase will be available upon approval by the Executive Board of the International Monetary Fund of the Stand-by Arrangement request.

• The second purchase will be available on (a) completion by the Executive Board of the International Monetary Fund of the first quarterly review of the program, no later than December 15, 2000; and (b) observance of the quantitative and structural performance criteria for September 30, 2000 and of the structural performance criterion for October 31, 2000. This first review will also establish the quantitative performance criteria for end-March and end-June 2001 and the indicative targets for end-September 2001.

• The third purchase will be available on (a) completion by the Executive Board of the International Monetary Fund of the second quarterly review of the program, no later than March 15, 2001; and (b) observance of the quantitative and structural performance criteria for December 31, 2000 and of the structural performance criterion for January 31, 2001.

• The fourth purchase will be available on (a) completion by the Executive Board of the International Monetary Fund of the third quarterly review of the program, no later than June 15, 2001; and (b) observance of the quantitative and structural performance criteria for March 31, 2001. This third review will also establish the quantitative performance criteria for end-September 2001 and end-December 2001.

• The fifth purchase will be available on (a) completion by the Executive Board of the International Monetary Fund of the fourth quarterly review of the program, no later than September 15, 2001; and (b) observance of the quantitative and structural performance criteria for June 30, 2001.

• The sixth purchase will be available on (a) completion by the Executive Board of the International Monetary Fund of the fifth quarterly review of the program, no later than December 15, 2001; and (b) observance of the quantitative and structural performance criteria for September 30, 2001.

• The seventh and last purchase will be available on (a) completion by the Executive Board of the International Monetary Fund of the sixth quarterly review of the program, no later than March 15, 2002; and (b) observance of the quantitative and structural performance criteria for December 31, 2001.